It’s only been three months since Congress lifted the crude oil exports ban and yet speculations are increasing around the benefits of exporting American crude. Attempts to diminish the value of crude oil exports are both premature and illogical in light of the fact that arguments for lifting the ban were clearly outlined as long term benefits, as opposed to immediate. Global energy transformation cannot happen overnight, but despite what the price of crude might suggest, a shift is already starting to be felt throughout the energy market.
According to The Wall Street Journal, the spread between West Texas Intermediate oil and Brent oil has started to widen once more, allowing the flow of American crude to continue its trek across the globe.
The first shipment of crude oil from the United States was a historical moment as both Americans and foreign allies cheered on the shipment of “liquid freedom.” Even now, countries from around the world are starting to recognize the benefits of having a stable source of energy to turn to. So far, American crude oil has reached foreign ports and trading partners across Europe, including France, Germany, Italy and the Netherlands – relinquishing them from the grasp of Russian and Middle Eastern producers.
Oil-rich Venezuela is also turning to U.S. crude, and Japan is set to receive a supplies of oil in May. Another achievement for American crude is the first shipment crossing the Panama Canal, carrying 380,000 barrels of WTI to Nicaragua’s western coast. All in all, one cannot deny that U.S. crude oil is indeed wanted, if not needed, across the globe.
But all of these achievements are being tainted with reports stating that the U.S. is now importing more foreign oil than it has in the past three years. As Bloomberg points out, U.S. refineries are turning to heavy oil provided by Nigeria, Mexico, and Venezuela. But the key word is “heavy” oil. U.S. refineries were not initially built for America’s light sweet crude oil. Instead, our refineries were outfitted before the shale revolution to process oil from foreign imports. Therefore, the U.S. needs to import foreign heavy oil for refineries to operate. In fact, Venezuela’s reason for importing U.S. crude oil is the exact opposite of the U.S. – they have a need for light crude oil, not their heavy crude.
Lifting the ban on crude oil exports was the right move by Congress. The market might take time to adjust, but the geopolitical and economic benefits will bring long-term positive impacts to the United States and foreign allies.